Hong Kong shares gain despite profit warning gloom

Hong Kong shares rose for a third-straight day on Monday, with HSBC closing stronger just before Europe's largest bank posted a first half earning report that matched expectations.

Talk of more easing from the United States and euro zone broadly supported markets, as the Hang Seng Index rose 1.6 percent to 19,585.4, outperforming Asian peers.

The gains came despite 17 companies listed in the territory, most of them Chinese, issuing profit warnings after markets closed on Friday.

"Obviously 17 is a lot of profit warnings for a single day, but I think it just goes to show you how much the Chinese economy has decelerated," said Jackson Wong, Tanrich Securities' vice-president for equity sales

Mainland Chinese markets declined, with large caps relative outperformers after the Shanghai Stock Exchange said it was proposing to speed up and simplify delisting rules to deter speculators.

The large cap-focused CSI300 Index of the top Shanghai and Shenzhen listings slipped 0.6 percent on the day, dipping into the red for the year.

The Shanghai Composite Index lost 0.9 percent, closing at the lowest since March 3, 2009.

The Hang Seng scaled a chart gap formed between the July 20 low at 19,511.9 and the July 23 high at 19,259.4. But, given the gloom ahead of the impending earnings season, it appeared difficult for the index to overcome resistance seen at around 19,651, its 200-day moving average and a technical level it has struggled to finish above since mid-May.

Other than a slew of earnings later this week, investors would also eye China's official PMI report on Wednesday for signs whether the slowdown in the world's second-largest economy is over the worst.

HSBC CLIMBS AHEAD OF H1 EARNINGS

HSBC Holdings Plc rose 1.7 percent ahead of its earnings announcement. After markets closed, Europe's largest bank posted first half pretax profit that was largely in line with market expectations.

But that was overshadowed by the threat that it faces a big U.S. fine for lax controls in its anti-money laundering systems and the risk it will be pulled deeper into an interest rate manipulation probe.

HSBC said that provisions made for "certain law enforcement and regulatory matters" accounted for $700 million.

Before Monday, HSBC was trading at 8.1 times forward 12-months earnings, a 39 percent discount to its historic median, according to Thomson Reuters StarMine.

It is also trading at 0.9 times forward price to book value multiple, a 54 percent discount to its historic median, according to StarMine. HSBC is down 4.7 percent in July so far, but it is still up 10.7 percent on the year.